Smaller cities jump on the cosmetic surgeries bandwagon as incomes rise

Wuhan resident Zhang Yuelin, 24, founder of a startup that trades high-end personal care products, is also famous as "Ying Yue" in the cyber world, where she has more than 130,000 followers.

On Soyoung, China's leading online resource for information on cosmetic procedures, her followers often read about Zhang's experiences. Her articles also dispense free advice on cosmetic procedures.

Zhang's cosmetic alternations started with a double eyelid procedure soon after she graduated from high school in 2013.

Since then, she has had several such treatments, including nonsurgical procedures like hyaluronic acid injection and intense pulsed light therapy.

"I care how I look. I want to look good. Cosmetic procedures are an integral part of my life, just like makeup, only having a better and longer-lasting effect," she said. "It makes me happy."

Millions of Chinese would relate to such expressions. Small wonder, the business sector is seeing rapid growth.

Data from Askci Consulting reveals medical enhancement is becoming the fifth-largest consumption market, trailing only real estate, vehicles, telecommunication and tourism.

In 2017, the Chinese cosmetic procedure market was worth 192.5 billion yuan ($28 billion), having a compound annual growth rate of 22 percent from 2013, according to a report released by consultancy firm Deloitte in June.

From 2018 to 2022, the CAGR will be 20.1 percent, and the market value will reach 482.3 billion in 2022, Deloitte predicted in its report.

The estimate, however, seems conservative. According to a report released on Dec 20 by China's major cosmetic procedure platform Geng-Mei (which is Chinese for "more beautiful"), the industry's size in 2022 was valued at 495.3 billion yuan already.

A recent report by P&S Market Research revealed China, together with India, is driving the Asia-Pacific to become the world's second largest, following North America.

Investors have certainly taken notice of the industry's market potential in China. Shawn Shi, managing director of HuaGai Healthcare Fund, said cosmetic procedure clinics have been receiving heightened investor attention of late.

According to consulting agency Third Bridge, 16 investments, involving 14 agencies and companies, were made in one year beginning May 2017.

About 37.5 percent of them were investments by angel investors toward A-round investments in startups. About 31.2 percent went into newly established companies toward B - and C-round fundings. Among those, most investors focused on firms offering services directly to consumers.

"Investors are now funneling money into entities that directly deal with consumers, like clinics and related apps, but they will soon focus attention on the upstream part of the value chain, like medicine producers and equipment manufacturers," Shi said.

According to the GengMei report, the year 2018 saw cosmetic procedure facilities increase by more than 10 percent in most provinces, signaling growing attention being paid to the manufacturers concerned, Shi said.

Clinics targeting young and middle-aged customers, especially women, are more likely to receive funding, Shi said. For, only such firms are expected to command a big customer base.

The younger generation (aged 20-35) are key to the market. Those aged under 28 were reportedly more than half of the 22 million consumers who went in for cosmetic procedures this year.

Not surprisingly, investors chased firms that best meet consumer demand. Compared with the past when surgeries that produced V-shaped faces dominated the market, consumers today have more varied demands.

Clinics interviewed said consumers now have surging demand for injectable products like Botox to relax and fill wrinkles, and energy-based devices that produce lasers, radio frequency waves and intense pulsed light or IPL.

"I care how I look, but I don't want to make too many changes to my face. Otherwise, it would look unnatural and I'm afraid of side-effects," said Yu Shasha, 26, who works in a trade company in Qingdao, Shandong province.

Beauty surgeries are becoming popular in lower-tier cities as well. Top-tier cities, however, retain the highest market penetration as China's cosmetic procedure industry started in such cities, according to Jin Xing, CEO and founder of Soyoung.

The company's report showed about 21.16 percent of residents of Beijng, Shanghai, Guangzhou and Shenzhen aged 18 to 40 have already had cosmetic procedures done.

Now, demand in smaller cities like Hangzhou, Suzhou, and Dongguan is rising, according to the GengMei report. Cities with the largest demand, however, are mostly mega cities like Beijing, Guangzhou, and Shanghai.

Medium-to-small cities as a whole are having faster market value growth compared to first-tier cities, because they together have more population, and awareness of cosmetic procedures is also on the rise, insiders said.

Consumers in small cities often have more expensive cosmetic procedures to start with, compared with consumers in first-tier cities, Jin said.

He attributed the difference to people in medium-to-small cities having more money for appearance enhancement, because expenditure on housing, vehicles, and other daily necessities is much less than in big cities.

Wang Jun, deputy president with GengMei, said the company's revenue increased most quickly in medium-to-small cities, including in Xi'an, Hangzhou and Shijiazhuang.

"Consumers in second-tier cities or even smaller ones usually have more spare income, as they are free from the pressures of housing and children's education compared with those in first-tier cities," said Jin Guangyang, CEO at Reindeer Beauty, a franchised cosmetic procedure clinic established earlier this year focusing on medium-to-small cities.

The company has set up a branch in Xi'an. It is planning to open clinics in capitals of provinces like Henan, Hubei and Hebei.

Before devoting himself to offline clinics, Jin served as a vice-president for business development at online platform GengMei.

"There is surging demand in second-tier cities and smaller cities for anti-aging programs, skin care products, and many others. Consumers in such cities are willing to spend much more than those in mega cities like Beijing," Jin said.

He further said most consumers coming to his Xi'an clinic are aged under 30, and their average spend is around 4,000 yuan.

"Going forward, we are planning to set up clinic chains with standardized, high-quality services, in smaller cities as such places still lack the facilities, even though there is a growing need for them," Jin said.